This is Part 2 of a series. Here’s the Overview, Part 1, Part 3, Part 4 and Part 5.
The growth of digital health
To combat the ever-growing list of increasingly urgent problems and conflicting incentives, key stakeholders in healthcare have turned to digital health solutions. Here’s a quick, by-no-means-exhaustive list of the categories of digital health solutions that have emerged.
- Tech-enabled health insurance — Oscar, Clover
- Real world evidence — Flatiron, Verana, Evidation
- Full-stack pharmaceuticals — Ro
- Pharmacy — Capsule
- Vertical-specific digital care providers — Omada, Maven, Cricket, AbleTo
- Tech-enabled primary care — OneMedical, Iora
- Digital therapeutics — Noom, Proteus, Pear
- Care coordination — Quartet, PatientPing
- Patient access — ZocDoc
- Population health — Komodo
- Patient financial engagement — Cedar
- Healthcare process automation — Olive
- Clinical trials — TrialSpark
All start-ups operating in digital health will live or die based on their abilities to completely own a segment of the patient experience, align the incentives of the three stakeholders, or both.
Consequently, the digital health industry has amplified. Total venture funding in the industry grew >7x over the 2010s, growing by an average of 32% year-over-year from $1.1B in 2011 to $8.2B at its relative peak in 2018.
With this explosion has come the interest of Big Tech. Among some notable recent activity:
- Amazon partnered with JPMorgan and Berkshire Hathaway in creating a healthcare venture, Haven (here’s a great Nisarg Patel post that dives into Haven’s potential strategy).
- Apple has been prolific in its healthcare approaches, from partnering with larger organizations (teaming up with Johnson & Johnson and Evidation Health for a heart study) to start-ups (consumer-focused diabetes product, OneDrop), and tackling health records. Tim Cook commented that Apple’s greatest contribution to mankind will be in health.
- Beyond its ties to Verily, Google is steadily growing its Google Health division, and its acquisition of FitBit made waves last November.
COVID-19 and its impact
Healthcare’s challenges with innovation have often been attributed to the inertia of the system and the complexity behind creating new habits. With COVID-19’s recent emergence creating urgency for digital health development, this may soon change. The systemic shock provided by the pandemic is certain to fundamentally alter how everyone perceives and approaches healthcare, especially around the definition of basic care, how we access it, and how we pay for it. The longer this pandemic extends, the more changes stakeholders will have to accommodate, leading to stickier habits in healthcare. Simply put, this isn’t a temporary delta, it’s a permanent step function.
As coronavirus raises Medicare spending from $38.5 billion to $115.4 billion over the next year, health systems and payers are scrambling to expand their capacity, ramping up their usage of digital health solutions — particularly those that enable telemedicine, telecommute, and virtual care management. Payers, especially those serving higher risk populations, could collapse under the steep incline in costs if the pandemic is prolonged.
Relief efforts will be crucial in alleviating the impact of this sudden spike in demand (telehealth services experiencing a 312% increase in demand from New York patients alone!). Through the CARES Act, hospitals will receive +$100B, $200 million is specifically going to aid providers offering telehealth services, and $275 million will be allocated to expand capacity and services for rural hospitals. Big Tech is responding with major contributions and partnerships of their own.
With the crisis elevating global panic, anxiety, and stress, the need for impactful behavioral health solutions has risen as well. Funding of behavioral health startups in Q1 2020 alone ($462M) has already exceeded half of the full 2019 year amount ($750M). Yet, similar to other domains of healthcare, the supply of behavioral health care has been unable to meet the demand spike and, as National Alliance of Mental Illness CMO Ken Duckworth notes, US mental health infrastructure is a “patchwork quilt”. Both providing immediate access and re-architecting this quilt are critical to managing the fallout of COVID-19.
As is the case with mental healthcare, the many gaps of the healthcare system command severe attention. A prolonged pandemic will mean the healthcare system will need to rely on solutions that can efficiently bridge these gaps, perhaps including companies that can provide:
- Management of healthcare supply chain and logistics
- Scalable staffing/onboarding of healthcare employees
- Accelerated clinical trial operations
- Drug development infrastructure
- Navigation of regulatory complexity
These developments have fueled digital health to record funding levels in Q1 2020. Nevertheless, it remains to be seen whether this trend will beat out the larger-scale macroeconomic trends of the pandemic’s impact.
In sum:
- The increasing demands of the three stakeholders of healthcare have lead to the explosive growth of the digital health industry and the subsequent interest of venture funding and big tech.
- The COVID-19 crisis has created pressure to expedite development and deployment of digital health. Resultant changes to healthcare will have a lasting impact on stakeholder expectations.
With the digital health industry seeing such steady growth as a result of tailwinds from industry trends and increased demand from a global pandemic, a core set of questions arises: can the industry maintain the growth and meet the demand? What challenges lie in the way?
